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How do you understand our democratic process operates? It could be something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, or the oligarchs behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted away from public scrutiny. Unlike our courts, these panels grant no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even companies operating from this country. They are open only to entities registered abroad.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These awards are based not on tangible damages but compensation the panel members determine the company could potentially have made. The state could be forced to drop the legislation. It will be hesitant to passing future laws of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and private equity fund legal actions in exchange for a portion of the awards. The outcome? National sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices enacted by parliaments is that this provision has been incorporated – absent public approval, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The justice determined that proposals to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have zero effect on national carbon targets. The new government subsequently revoked the permission the previous administration had granted. Now, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the corporations bringing the case.

In August, a firm whose beneficial owners are located in the tax haven lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was established to consider the case.

The company is suing the UK for the profits it would have generated if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. Who is representing it challenging the state? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a foreign company contests it through an undemocratic private court, and a elected official represents its behalf.

A Sanctions Case

Concurrently that the court on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case so far, but it is highly possible that he may employ the tribunal to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: an amount representing half state's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

The public was told that these events wouldn’t happen. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” A consultant on this topic labelled activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That warning has come to pass. In the current period, oil and gas and resource corporations have initiated a historic level of suits against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have so far won $114bn via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP